Stimulus Payments and the Pandemic: Evaluating Low‐Income Individuals' Spending Behaviour

ABSTRACT This paper evaluates the marginal propensity to consume out of the 2020 CARES Act stimulus payments using high‐frequency, transaction‐level data for a sample of low‐income prepaid debit cardholders. It finds that the spending response to these payments is similar on impact to the response to a temporary change in regular income, and only somewhat smaller cumulatively (65 cents vs. 75 cents, respectively, per dollar). The stimulus spending response is stronger, however, among cardholders with particularly low 2019 income—illustrating the beneficial impact of fiscal support during the COVID‐19 pandemic for a segment of the population likely in particular need of assistance.